I started my drop-shipping store just after failing three other projects with few hundred dollars left in my account. During the first 15 months, it hit 3M in revenues and I successfully sold it to our supplier in China.
Together with my partner who happened to be a great developer we automated everything we could – from generating Purchase Orders to tracking failed deliveries and auto-asking the supplier to reship the parcels.
comments Q and A
What is your net profit of that 3m?
What did you sell your business for?
- During all our existence, the average net profit was ~20%
- I am afraid I cannot disclose this.
- We were trying to move to another product vertical (women’s clothing) and failed badly. We then thought it will be best to sell the business and move on with other projects we had at the time.
What website did you use to find drop shipper supplies and how did you verify that they were legit and their items were of high quality?
A/We Googled a lot and went through the most popular databases like worldwidebrands.com and saleshoo.com. But eventually, we found our supplier on AliExpress.com (by just messaging him) Our supplier wasn’t very good or big and he built his business together with us.
However, we quickly faced our first problems of hundreds of pending tracking codes. After we noticed that we just bought a ticket and visited him in China, agreed on splitting the loss if the order is not delivered or as described and continued to work together.
Did you guys hire a translator or are you guys Chinese? And do you suggest visiting your supplier once you settle on one?How long does the shipping take? From the customer ordering and them receiving and they are totally fine with this wait for their products?
RE: Translator: No we didn’t. They had some employee who speaks raw English and that was enough. We also documented each meeting and sent email notes so they could translate anything they didn’t understand.
RE: Visiting: Depends on the sales. Actually, we did it because it sounded cool. Business meeting in China :)) But it helped us a lot as well. It really allows you to be more confident about your businesses processes.
During the first visit, e made a mistake by visiting only one supplier. So before travelling to China again, we contacted all suppliers we could on AliExpress and visited more of them just to understand how they work, see their warehouses, quality, etc.
RE:Delivery: A lot of sellers offer ePacket delivery and it takes around two weeks to delivery a parcel to the US. Outside the US I suggest using China Post or AliExpress Standard Shipping (http://take.ms/N8xjT) – it takes around 30 days.
There is no problem about the shipping speed as long as you inform your customers clearly about that.
So were you just telling people products came right from China?they Must be waiting a couple weeks for their product to arrive? This must be an issue with customer satisfaction, people want their products in a couple days, not a couple weeks?
A/Yes. But I have experienced that people want their products to be delivered when they expect that.
If you say you’ll deliver the product in 30 days and deliver it in 30 days. That’s fine. The customer satisfaction will be around 100%.
But if you say you’ll deliver the product in 2 business days and delivery in 5. The customer satisfaction will be much lower.
A lot of people are OK with longer delivery. Especially in countries outside the US and Western Europe.
- How were you driving consistent traffic to your store?
- I notice a lot of successful e-commerce stores have a 1:1 ratio (or close) of revenue and visitors. What was the price range of your product??
- Drop shipping has notoriously low-profit margins. How were your profits?
- If you were starting your store over today, what would you do to make your first 100 sales?
- What’s next for you now that you have sold the business?
- Mainly, we were using Facebook Ads. Later we tried RTB, GDN, Twitter and other advertising platforms but without any great results.
- Our ratio of revenues and visitors is 1.5 : 1. I suggest you look at unique visitors cause repeat visits can look for tracking info, contact support, etc. Our average basket value was around $50 USD.
- I’ve heard that too. But that’s not the case when you are working with Chinese suppliers who don’t have any limitations/requirements. Our retail price was often double the supplier price and our net profit was constantly around 20%.
- Facebook Ads. But I would try SEO and other traditional techniques to get further sales 🙂 The problem that our sales were tightly related to our FB budgets. When we had problems with Facebook accounts, our sales decreased significantly.
- I’m now working on Ali Import and help other businesses exploit AliExpress and drop-shipping model. I try to understand our audience mostly work on customer support and consultancy (as every co-founder does I guess).
Could you share more on how you targeted on FB to get a positive ROI? Did you target people based on competitor products they liked, based on general interest, or something else?
A/Most of our campaigns (if not all) targeted lookalike audiences. Mostly lookalikes of website visitors since this type is fresher in comparison with customer email lookalikes.
We used oCPM method ant let Facebook determine the price for our conversions and optimize for the lowest price. Our conversion was triggered when someone placed an order on our site.
But later we had a lot of success using Add to Cart (visits URL /cart) as our final conversion. This way Facebook collected more data and was better at optimizing our campaigns.
How many different products did you offer when you first started?
A/We had around 40 products during the first 3-4 months.
- How did you come across your niche/product?
- What was your advertising budget once you got your site up?
- We saw them trending on Ebay and Amazon. We later looked for ideas on sites like Wanelo, Polyvore. Also tracked competitors and analyzed Google Keywords and Trends.
- We constantly hit positive ROI and our only limit was our ability to scale Facebook campaigns. During the most successful months, we spent around 5K/day on Facebook ads. Later we failed to spend more than 1K/day.
What would you attribute to your failure in the women’s clothing?
A/The main reason was trying to be big and not going lean.
We hired a developers agency to make a custom built site on Magento. We created slogans, articles/content, marketing strategies with other professionals. It took us around 5 months to launch this store and we closed it after making 5 orders with $1,000 advertising spent.
There were more problems. I don’t know why we chose Women’s Clothing. The market is very competitive and we didn’t have anything to offer. I guess that was caused by our aim to be big too.
As I see it now, we could try Plus Size Women’s Clothing and I believe we would have had much more success.
Assume I have no e-commerce experience, but am a successful entrepreneur. I want to start a similar business today. What would your first steps be?
A/I like the concept of starting small and lean. If I were you I would launch a store, spent some money on advertising, adjust the products and store accordingly. If you’re successful, you can spend more on ads and testing. Or hire professional advertiser so you know that your tests were valid.
But I see too many businesses developing their stores, marketing plans, processes for months and a week after their launch they understand that they selected the wrong product category, or audience or concept.
As Reid from LinkedIn said: If you’re not embarrassed by the first version of your product, you’ve launched too late.
That went way over my head, back up and start from the beginning, how do I even get a store.
- Register on Shopify
- Go to your settings page and edit each section (billing address, payment gateways, delivery rates, checkout, etc.)
- Go to Online Store -> Domains and purchase a domain.
- Go to Online Store -> Themes -> Customize Theme and edit your Theme Look.
- Go to Online Store -> Pages and add some content: Shipping Page, About Us page, any other relevant information like FAQs, etc.
- Install Ali Importer Shopify app. (It’s not a promotion, I would suggest that even if I weren’t working there).
- When you know what products you will sell, go to Products -> Collections and create the categories for your products.
- Use Ali Importer to import few dozens of products to your store.
- Go to Online Store -> Navigation and edit your main menu so it includes all your collections.
- Start Facebook Ads.
Why choose Facebook As a primary channel instead of Adwords, Amazon, eBay etc. I read you had comp on the ecomm sites but marketing to FB buyers can be tricky since they are much higher up the funnel
A/We found Adwords to be very expensive and not scalable if we narrowed down our keywords.
We haven’t considered Amazon or Ebay. There is already a huge drop shippers competition there.
Also, you can only position yourself when you control your own site + with Amazon or Ebay you are excluded from running retargeting campaigns, using Email Marketing, etc.
Who was doing your drop shipping? It sounds like you delivered direct to customer from china? Do most suppliers on Ali express do this happily?
A/Yes, our products were delivered directly to our customers from suppliers warehouse in China. I was never rejected, but some sellers might refuse to do that.